Is real estate a viable investment opportunity yet?
by Tony Ronan
Most real estate owners are homeowners. And from an owner-occupied perspective, ownership today makes absolute sense. This assumes, of course, that you plan to live in your primary owner occupied residence for a minimum of 3 years. This gives the market time to shake off the after effects of the sub prime crisis which has been so pervasive.
Not all real estate owners are home owners, some are investors, and some are speculators. From a pure investment standpoint, we question the wisdom of buying today. Major markets that have recorded record appreciation in recent years have been dramatically affected by the tightening of credit and the lack of mortgage liquidity. Consequently values have taken major hits in recent months.
To get an accurate picture of what is happening, look at the last 5 years percentage trends - both up and down. If they are within 10% of the value at the beginning of 2003, you would likely breakeven over the next 24 months and be positioned for potential profit with a longer hold period. Especially now that the values are lower and current interest rates are fairly low, non-owner occupied properties might cash flow with current rents. But you have to be careful and scrutinize the data.
Market projections show certain areas in the lower cost regions are experiencing increased purchase activity. Also, it seems prices are stabilizing. While other regions show there is still a potential 5 to 15% decrease in value over the next 9 to 18 months.
So be careful. Don’t just buy without first doing a lot of homework. Further investigation needs to be done into the specific residential real estate markets you might be considering. The good news is we are starting to see a few reasonable investment opportunities starting to emerge.
Tony Ronan is the Chief Executive Officer of Baker Ronan Financial, a full service mortgage banker doing business as First Nations Financial.
If you have any questions about your mortgage or would like to find out if you should think about refinancing, contact Tony (888 282-3344 x359) to get his candid opinion. He has over 15 years of experience in the mortgage business.